The planned merger of Arkan and Emirates Steel will create the UAE’s biggest steel and buildings material company, majority owned by sovereign wealth fund ADQ’s Senaat. Given CEO Mohamed Hassan Alsuwaidi’s recent signals of a surge in capital deployment in a dash for growth, the consolidation could be a prelude to Senaat making future public offerings in the new entity, freeing up liquidity for portfolio diversification.

Senaat currently owns 51% of Arkan and all of unlisted Emirates Steel and would own 87.5% of the merged listed entity, which is expected to be worth more than US$3.5 billion. The merger is the latest move towards consolidation of ADQ’s assets, which include Abu Dhabi’s railway, seaports, airports, utilities and stock exchange.

ADQ assumed control of Senaat, an industrial holding company, in March 2020 alongside a raft of other state-owned companies in non-oil sectors. Global SWF has estimated total AUM at US$110 billion, a figure that ADQ has said is not far off the precise but undisclosed total. Senaat continues to exist as a separate legal entity, but with ADQ increasingly pushing into venture capital, including in emerging markets, it may press the industrial holding company to expand its reach – or potentially provide liquidity for ADQ’s expansion through sell stakes on the public market.

In an interview with Bloomberg last week, Alsuwaidi indicated ADQ would continue its breakneck pace of dealmaking with a view to doubling AUM within seven to 10 years. He said, “We’ll deploy significant amounts this year and over the next five years. People will be amazed at how much we will be able to deploy in the markets we operate.”

ADQ’s state mission is to “extract value” out of the state assets through whatever means available, according to Alsuwaidi, who was previously an executive at Mubadala. He told Bloomberg, “Every single asset, every day of my life, will continue to be on the list to be taken public or monetized. And that will happen day in, day out.”

Alsuwaidi’s statements support the likelihood that ADQ will sell stakes in its chunky legacy assets to gain some cash and agility in high growth venture capital. Since its launch, the investor has scooped up a range of assets that go beyond a focus on infrastructure, including a 45% stake in commodities trader Louis Dreyfus Cohealthcare and pharma companies, and a digital bank. But venture capital seems to be a major focus of the investor’s strategy.

ADQ has established the Alpha Wave Incubation Fund, indicating that ADQ is not just relying on external asset managers to leverage early-stage opportunities but is also rapidly building up the capacity of its in-house team. Research by Global SWF has identified a venture capital team at least as large as Abu Dhabi stablemate, the Abu Dhabi Investment Authority, and it has been building interests in early-stage businesses in India and Southeast Asia – a massive shift in emphasis from an erstwhile infra holding company.  

Nevertheless, infrastructure and domestic economic diversification will remain the SOI’s core activity. As Alsuwaidi stated, “We do have characteristics of a sovereign fund. But we are defined in our articles as a holding company with developmental nature. And so, core to our bread and butter, is that developmental nature of our investments and our deals.”

Its commitment to domestic infrastructure was demonstrated with its involvement in the US$2 billion joint venture with ADNOC in the petrochemicals sector, Ta’Ziz, announced in November. This will include a new port, utilities, infrastructure, feedstock supply and shared services. It also acquired a 10% stake in ADNOC’s gas pipeline assets in October, costing it over US$1 billion.

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